Everything According to Plan

At most companies, planning is done only at the top -- or not at all. But businesses like Springfield Remanufacturing and its follower, American Images, are tapping hidden sources of ideas and innovation by including all their workers in the process

For Harlan Accola, 1986 was one horrendous year. His aerial-photography business, Skypix, hit a wall and nearly vanished from sight. And he had only himself to blame.

Skypix had started as a hobby. After high school Accola began selling his aerial shots of farms and homes to help pay for his pilot's license, his flying time, and his photography habit. His brother Conrad, also a pilot, joined in to make a few bucks.

When their sideline unexpectedly evolved into a business, in 1980, and made money, the brothers had visions of sales booming to $3 million, and then $10 million. "We thought that's the way it happens," Harlan says. "You hit a niche and an opportunity, and it's magic."

A bookkeeper and later a certified-public-accounting firm furnished financial statements that Harlan didn't understand. "I didn't know anything about business," he admits. "And worse, I didn't think it was important. I thought a financial statement was just something you had to give the bank to keep your loan OK. So I took it, looked at the bottom line, and tossed it into a desk drawer." The brothers' earliest "business plan" was simple: always have enough cash to pay next week's bills.

For a time the Accolas' seat-of-the-pants style held the business together. By 1986, however, their world was coming unglued. Dozens of unpaid creditors were hounding them, and the Internal Revenue Service was demanding overdue taxes. Alarmed, the company's bank called its $240,000 note for working capital. The brothers renegotiated terms with the bank and other creditors and reincorporated as American Images Inc.

Harlan Accola blames his age -- he was 19 when he started Skypix -- and the hubris born of early success. "I thought if I made enough sales, everything else would take care of itself. But I confused profits with cash flow."

American Images is now a $4.7-million business with 54 employees and 22 independent sales reps. The company's seven single-engine Cessnas -- three of them owned outright and four on flexible leases -- operate in 31 states from its base in Marshfield, Wis. Still, Accola's former ignorance of basic business principles gnaws at him. "We grew too fast," he confesses, "and it was simply from lack of planning. We must have looked like a real comedy team to our suppliers."

Since those madcap days, Accola has turned religious about planning. He credits his conversion to Jack Stack, chief executive of Springfield Remanufacturing Corp. (SRC), who has appeared in this magazine's pages before as creator of the Great Game of Business, the revolutionary management system that saved his own company.

The Great Game of Business -- about which Stack wrote a book, published in 1992 -- is not a how-to manual. It's more a worldview that prompts one to think differently about how to run a business. Employing metaphors of sports and competition, Stack argues that companies can thrive if they tap into people's universal desire to win.

When his readers clamored for more, Stack and SRC's staff responded in 1993 with two-day crash courses on the inner workings of their company. Since then, nearly 1,000 folks have trekked to SRC, in southwestern Missouri, to learn what Stack calls "the only sensible way to run a company."

Harlan Accola made his pilgrimage last November. He had read Stack's book and tried to implement its ideas. But he needed a push, he says, to weave Stack's principles into the fabric of American Images.

Stack is no ivory-tower preacher. As chairman and CEO of SRC, he's on the front lines of a business he calls tough, loud, and dirty; a place "where people work with plugs in their ears and leave the factory every day covered in grease." He has built a formidable company on a simple belief -- that "the best, most efficient, most profitable way to operate a business is to give everybody in the company a voice in how the company is run and a stake in the financial outcome, good or bad."

That philosophy translates into the annual planning process that's at the core of SRC's operations. It's a companywide process that holds everyone accountable. The result? Since 1983, when Stack took control, SRC's annual revenues have grown from $16 million to $105 million, and the workforce has expanded from 119 to about 750 employees.

That achievement traces its origins to the siege mentality of SRC's early days. The company began as a division of International Harvester. In 1979 Stack, newly installed as plant manager, was directed to shut it down. But he and 12 fellow managers decided to raise $9 million, buy the plant, and run it themselves.

The deal they signed in early 1983 saddled them with one of the most lopsided leveraged buyouts in corporate history. The new owners had scraped up only $100,000, and they had to borrow $8.9 million, for a debt-to-equity ratio of 89 to 1. "The bank thought we were brain-dead, and it was just a question of time before they'd pull the plug," recalls Tom Samsel, now SRC's vice-president of corporate training.

And it wasn't long before Stack, the leader, realized he didn't actually know how businesses worked. "I was economically so illiterate and stupid it was unbelievable," he says. "I'd studied business in school. I'd been to the best seminars and supervised thousands of people. But I'd been treated like a worker who puts washers on bolts -- I knew only pieces. I guess Harvester thought it was too difficult for us to learn financial ratios or liquidity or how to make a profit.

"Everything we've learned here was through failures," Stack adds. "We weren't skilled in sales and marketing, because that had been done at Harvester's corporate level. On my first sales call in 1983, I lost a $10-million account with our biggest customer. At the end of 120 days we had a negative net worth, and I was so stressed that big clumps of my hair were falling out. One doctor thought I had Lou Gehrig's disease or multiple sclerosis, but a neurologist said it was just nerves. He told me to get a hobby or I'd die."

The specter of impending doom gave rise to a planning ritual that focused SRC on controlled growth, orderly operations, predictability, and wealth creation. Stack involved every SRC employee in the planning and established a bonus system based on hitting the plan's targets. With open-book management, a concept he pioneered, all employees have free access to the company's financial data and can monitor the plan's unfolding. And SRC's employee stock ownership plan gives everyone a stake in the outcome and an incentive for mutual prosperity.

SRC's fiscal year begins on February 1, but planning officially kicks off in October, when Stack and the corporate brass meet with the sales and marketing managers of SRC's 15 divisions in a formal two-day event, usually staged off-site. Here, in brief, is how the system is set up.